From War to Welfare

How taxes and entitlements begin with militarism

Conservatives should be leery of jumping into wars not only because American power may become overextended—especially in a time of fiscal crisis—but because war makes government expand rapidly at home, even in areas outside of national security. Although conservatives routinely criticize Franklin Delano Roosevelt’s New Deal for ushering in the era of big government, the deeper origins of the American welfare state lie in the warfare state.

During wars—especially big conflicts that require mobilization of the entire society to fight them—interest groups see the government doing things it didn’t do, or wasn’t allowed to do, previously. After the conflict, newly empowered bureaucrats and constituency groups benefiting from wartime expansion lobby to keep at least some of the new measures in place. The creation of the Food Administration during World War I, for example, ultimately led to the expectation in the farm sector that government regulation could prop up farmers’ incomes.

Even more fundamental, however, is the impact that war has on a government’s ability to finance its expansion at home. The potential for tax revenues determines how big government can grow and the number and size of programs that can be supported. (Even deficit financing is based on confidence in the government’s ability to raise funds through taxes.) And war is the force that has most often led to new and greater sources of nourishment for Leviathan. According W. Elliot Brownlee, author of Federal Taxation in America: A Short History, “moments of sweeping change in tax regimes have come invariably during the nation’s great emergencies—the constitutional crisis of the 1780s, the three major wars [the Civil War, World War I, and World War II], and the Great Depression.”

A case in point is the income tax, one of the most intrusive and economically irrational taxes a government can impose. One commissioner of Internal Revenue went so far as to say in 1871 that the income tax was “the one of all others most obnoxious to the genius of our people, being inquisitorial in its nature, and dragging into public view an exposition of the most private pecuniary affairs of the citizen.” Unlike sales or excise taxes, which inhibit consumption, the income tax penalizes economically productive work and the just rewards for it—thereby dragging down prosperity.

The federal income tax originated during the emergency of the Civil War, the nation’s first modern conflict. During that episode, spending by the federal government increased from less than 2 percent of the Gross National Product (GNP) to an average 15 percent of GNP. The Republican leadership admired how the British Liberals had used income taxes to finance the Crimean War instead of imposing higher taxes on property, and so the U.S. adopted the same device. By end of the Civil War, the wealthiest 10 percent of all Union households were paying income tax, which accounted for about 21 percent of federal tax revenues—with excise taxes comprising 50 percent and tariffs accounting for 29 percent.

The Civil War-era income tax was abolished in 1872, and the federal government returned to financing itself through its traditional antebellum means: excise taxes on particular goods and tariffs on imports (that is, two consumption taxes) and sales of public land. Yet the wartime policy had set a precedent, and after foreign trade (and thus tariff revenues) fell during the depression of the 1890s, the income tax was resurrected. Grover Cleveland, an otherwise very conservative president, accepted the income tax in exchange for lower tariff rates.

In 1895 the Supreme Court ruled that the new tax was unconstitutional because the U.S. Constitution required any direct tax to be assessed among the states according to population; taxing individuals according to their incomes did not meet that requirement. But in 1913 the constitutional problem was surmounted by the ratification of the 16th Amendment, which specifically allowed the imposition of an income tax. This time the tax had roots in the populist and progressive movements: the broad public perception was that the burden of tariffs and excise taxes, which accounted for most federal revenue, fell disproportionately on the non-wealthy.

Domestic movements may have reintroduced the income tax, but it was World War I that led to the income tax replacing tariffs and excise taxes as the federal government’s primary form of taxation. According to Brownlee: “The income tax was a highly tentative experiment until 1916, when America prepared to enter World War I and settled on it as the primary means of raising taxes for the war.” The Great War was transformational in bringing permanent “big government” to the United States, a change made possible by the war’s enhancement of the income tax’s role in taxation.

During wars, trade—and thus tariff revenue—gets disrupted, requiring governments to levy greater internal taxes to fund conflicts. The income tax showed once again during the world war that it had a great capacity for generating revenue. After the war, the ballooning of tax receipts underwrote the vast expansion of federal domestic programs during the Hoover administration, FDR’s New Deal, and beyond.

But it took another war, World War II, to turn the income tax from a burden on only the well-to-do into a tax on most earners. From 1939 to 1945, the number of people paying income tax rose from 3.9 million to 42.6 million—roughly 60 percent of the labor force—and income tax revenues soared from $2.2 billion to $35.1 billion. The federal government could now take in massive revenues from taxing middle class salaries and wages.

Franklin Delano Roosevelt and the New Dealers had believed that a mass-based income tax was the best way to guarantee a permanent stream of funds to support federal programs. They were right. In 1940, before America’s entry into World War II, the federal income tax accounted for only 16 percent of all government tax revenues. By 1950, the federal income tax had grown to 51 percent of all government tax revenues. The World War II tax regime was supposed to be temporary, but it became permanent.

From the postwar period until the late 1970s, the broad base of the mass income tax, combined with economic growth and inflation that pushed people into ever higher tax brackets, allowed the federal government to swim in swollen revenues, which were used to expand domestic and overseas programs while cutting excise and corporate levies. The augmented domestic programs made possible by the income tax included healthcare (for example, Medicare), education, welfare, urban development, and federal aid to state and local governments—most of the welfare state, except for Social Security. But that too has its origins in wartime measures.

To encourage male breadwinners to enlist in the military, ever since colonial times all levels of government, including the federal government, had paid pensions to widows and orphans who lost a provider in war. But in 1862, as early Union defeats tempered patriotic enlistment in the North, the federal government increased the level of compensation for such dependents and widened the range of family members covered by the payments to include not only widows and orphans but elderly parents and siblings of those killed in battle. After the war, this social program came to serve a significant fraction of the population.

From the American Revolution to 1861, the federal government had paid 143,644 pension claims. From 1861 to 1890, Civil War pensions amounted to more than five times that number. By 1889, U.S. pension spending alone was greater than the entire federal budget before the Civil War. By 1893, a whopping 40 percent of the federal budget was allocated for disabled troops, widows, orphans, and the elderly. The patronage-oriented politics of the Republican Party—which dominated American politics in the latter half of the 1800s and early 20th century—led to huge expansions of pension benefits to win votes.

In 1879, the Arrears Act caused many veterans, who hadn’t realized they were disabled until the government offered $1,000 or more for finding aches and injuries, to flood the Bureau of Pensions with claims. Although, according to its commissioner, the bureau was the largest executive bureau in the world, it had few means to detect fraudulent claims, which were rampant. During election years between 1878 and 1899, Republicans used the bureau to dole out pensions rapidly and heavily in key electoral states.

In 1890, a quarter century after the Civil War ended, pension eligibility expanded to include any soldier who had served 90 days or more during the war and was unable to do manual labor—whether or not he was injured during the conflict, or even whether he had seen combat. Similarly, widows of soldiers who had served in the war for 90 days or more got pensions, regardless of whether their husbands had died in the conflict.

As historian Megan J. McClintock concludes:

Civil War pensions were not simply a military benefits program … but also a social welfare system that contained assumptions about familial relationships. Only those pension claimants whose domestic arrangements met with approval received federal moneys. In the case of mothers and fathers, the ideal of filial devotion encouraged the federal government to become a provider of poor relief for the elderly in the late nineteenth century. Ideals of familial relations shaped policy directed at Civil War widows as well, but with very different results. Rather than simply benefiting from the expansion of federal assistance, widows were subjected to increasing government supervision of their private lives.

If a widow remarried, she was no longer eligible for the pension. This created a perverse incentive for women not to remarry but instead to cohabitate or become prostitutes. Having fostered this development, the government then had to investigate whether either of these forbidden alternatives was happening.

McClintock provides a summary of the Civil War mobilization’s dramatic effect on widening the federal government’s social welfare role:

Forced by large-scale warfare to broaden its social welfare role, the federal government developed a family policy. In the postbellum years, that family policy reconstructed households shattered by the Civil War.

The extensive involvement of the federal government in Union households demonstrates that the links between military recruitment and family needs have shaped the evolution of social welfare policy in the United States. Before the Civil War, the federal government had assumed only limited responsibility for military dependents and virtually none for the civilian poor and disabled. Pre-Civil War military benefits were piecemeal and limited to veterans, widows, and orphans; moreover, the federal government abstained from social welfare spending for the civilian poor, and local charity was stigmatized and parsimonious. The nation’s first “modern” war transformed the landscape of relief, forging new ties between the federal government and families, and between public and private economies, as the government sought to increase the number of men willing to leave their families in the 1860s and to prepare future citizen soldiers for patriotic sacrifice.

According to Theda Skocpol, the Civil War pension system degraded into what became America’s first massive, federally funded old-age and disability welfare system:

By the time the elected politicians—especially Republicans—had finished liberalizing eligibility for Civil War pensions, over a third of all the elderly men living in the North, along with quite a few elderly men in other parts of the country and many widows and dependents across the nation, were receiving quarterly payments from the United States Pension Bureau. In terms of the large share of the federal budget spent, the hefty proportion of citizens covered, and the relative generosity of the disability and old-age benefits offered, the United States had become a precocious social spending state. Its post-Civil War system of social provision in many respects exceeded what early programs of ‘workman’s insurance’ were giving old people or superannuated industrial wage earners in fledgling Western welfare states around the world.

Skocpol adds, however, that public revulsion against the expansion, excesses, and corruption of the Civil War pension system from the 1870s to 1910 stalled the onset of the welfare state proper—then taking hold in other Western countries—until the New Deal in the 1930s. Americans may have been repelled by Civil War pensions because—in a classic case of high taxes leading to surplus government revenues leading to excess spending—Republicans supported lavish pensions to groups in their political constituency (Union veterans) to justify continued high tariff walls to protect Northern industries, which were among the most influential supporters in their political coalition. The interests of such industrialists coincided with those of pensioner lobbies and the bureaucratic empire of the Bureau of Pensions to widen the program over time.

By 1910, 45 years after the war, about 28 percent of American men aged 65 or older were receiving federal benefits. This led to the erosion of public confidence in a system then as generous as that of nascent welfare states around the world. Nevertheless, in a pattern that has been seen before, a precedent had been set and would be available at the next crisis—in this case, the precedent that the federal government could administer what amounted to a nationwide retirement program. The groundwork for Social Security had been laid. As Skocpol summarizes, “Civil War pensions at their height were America’s first system of federal social security for the disabled and elderly”—and the embryo of other, even broader and more expensive federal programs to come.

Conservatives should not fail to recognize that war is the most prominent cause of the massive welfare state that has been erected in the United States. Both taxes and spending as we know them today—Leviathan’s head and tail—spring from the warfare state. Traditional conservatives recognized that war is the primary cause of overweening government in human history; thus, they promoted peace. Since the rise of the neoconservatives, however, the right has forgotten this important lesson, which has to be relearned.

Ivan Eland is Senior Fellow and Director of the Center on Peace & Liberty at The Independent Institute.

What drives an empire is its ability to extract overseas wealth and repatriate that wealth to buy domestic stability. At the height of the US Empire after the Second World War the US was able to meet union demands and provide the social welfare benefits that are now bankrupting us.

When the US joined the World market with trade treaties and as other countries built manufacturing power, the previously insulated US employees began to slide into the Darwinian ruthlessness of the marketplace. In the meantime, US industry morphed into multi-national corporations who viewed America as an international hit-man and little else.

What the American people are left with is the expense and pain of managing an empire with a shrinking ability to pay for its domestic benefits. It hard to see how this ends well.

“War is the health of the state,” said Randolph Bourne during the 1st World War. This is true and provable by looking back at history and seeing how Civil and Constitutional Rights were shunted aside during wartime. Lincoln,Wilson and FDR all stepped on the Bill of Rights during their tenures as war presidents. Today we have the so called “War on Terror” which is an open ended war that could last forever. With the coming of the Patriot Act and other following on legislation we see the shredding of whats left of the Bill of Rights and the Constitution. With that said, there is a lot of truth in Mr.Eland’s thesis that the procuring of revenue for the expansion of the Welfare State was facilitated by the creation of Fiat Currency and Direct Income Taxation that was used to fund wars. We are left with the legacy of inflation,high taxes and unsustainable debt that will eventually be the ruin of America.

The primary reason for the influx of immigrants to the United States has not been welfare until recent history. The attraction to the US up to and shortly after WWII, was not a welfare check. In fact, an host look at the lives of immigrants to the US prior to WWII depicts a very tough life, for many harsh. But they paid the price because of the nation’s promised potential for a better life based on opportunities and ‘freedom’. And after WWII, the escape from war torn Europe had little to do with government supplemental programs.

The suggestion that welfare has been the big attractor especially prior to the 19760′ or 70′s does not appear to be supportable. Welfare as the primary attractor, didn’t really exist as it does today. Prior to the 1970′s immigrants arriving in the US were not were expected to learn the language. In fact, those immigrant populations saw it as their duty, and priviledge to learn the language. There were no suits or demands that street signs, or anything else be printed in their respective language. They didn’t come here to see what they could get, but what they could build.

Let me see if I understand this article. Money spent for military endeavours are ill advised unless they derive some financial benefit to the US proper. That if a disaster occurrs and the US has to rely on the Mexican Marine Corps, something has gone drastically wrong. That was arather embarrassing realization. And belies something that has been going on for quite some time. Of course warfare is a drain on the nations investment opportnuities here. That unless, there is some ROI or an available replenishable surplus, those monies are gone as pure costs.

The commentary that the United States engages in warfare merely to extract wealth with WWII as an example is to turn ignore some very tangible realities:

1. Europeans had no other place to turn for aid.

2. The war devestated the economies of all parties involved and devestated its resources of production and travel

3. The situation was mirrored throughout Asia.

4. As the sole survivor of WWII with its resources relatively unscathed and Asia and Europe sorely in need of goods and services — the US benefitted.

And while I have little doubt that our gun boat diplomacy in Asia and other parts of the world were for economic and strategic gain. It is unclear which reigned supreme.

Nothing worse than liberals bantying about as conservatives. The old Mexican two step, a move that our enemies south of the border have perfected rather well to their advantage. President Bush, and others have been bamboozled.

Unfortunately it seems even here on the comments section there appears to be people who demonstrate that the American right’s greatest preoccupation is war. They would sacrifice the Constitution and the Bill of Rights in their pursuit of war. Far too many ‘conservatives’ still refuse to see that our American history of war, more than anything else, has led us to this moment in 2013 with massive deficits, runaway entitlements, and an imperial presidency. Truly, War is the Health of the State. Take care when fighting monsters not to become a monster yourself. Sadly, some in the conservative moment have become the worst of war-like monsters.

Sometimes, a fight is neccessary. It is hard to look back throught the lens of modern day telescope and determine from our current knowledge and dejustify what was occurring in some other time and space with certainty.

I don’t know if the revolutionary war was neccessary, or even warranted.

The war of 1812, was thrust upon us and perhaps are privateers invited it.

The Mexican War — is with us still, albeit another form. When those in the country protest by the thousands in your streets — it’s a clear sign the war ain’t over. This a fairly nasty affair supported by Mexican leadership, liberals under the guise of equality and corporate interests. The weapons are legal, as well as illegal, and as nefarious as compromising people in power or making appear as though they are compromised so as to damage their integrity . . . a rather seedy affair.

Barbary pirates as to a real threat to US shipping, I would have to look at the numbers. the $18,000 payouts to ensure safe passage certainly dwarfed the expense of sending a Fleet to engage the region, but from one perspective the cost of fighting extortion held gains in power prestige and dollars via, the message that such behavior would not be tolerated, and savings accrued from not ever having to pay said extortion/tarrifs again are justifiable.

The Civil War — this is a tough call. One could say, that the war was an overaction to the attack on Fort Sumter. And that a limitted engagement might have been more reasonable. Certainly the after action response as to slavery was mismanaged and perhaps a disaster.

I don’t have a clue what the financial gain was for the US by engaging the phillipines. I don’t recall any loss of shipping from Asian pirates, but our behavior was certianly unbecoming as we betrayed the Phillipinos bid for independence by simply replacing one colonial power for another. Strategically, the move was proved to be a bust as Japan made short order of the place.

Interesting angle of analysis. A new way of looking at things. Perhaps there is hope for ending of epistemic closure.

Of course, what this line of analysis suggests is that pursuing an end to war is a worthwhile and conservative goal. Somehow, that seems like a strange mix in the U.S., to say nothing of Republicans. All the same, it’s different and suggest better policy. For example, putting an end to the endless war on terror, which endless by virtue of its conception, might be opposed by conservativism that take this line of reasoning into account. Interesting…

It would be really nice to turn back the clock and have this conversations a week after 9/11. I wonder how many here actually understood immediately what the proposals of response were inviting.

I wonder how many here actually took a stand in the face of near complete publiuc support for the war on terror, the invasion of Iraq (before they understood that war is a messy business best avoided).

The public pressure and fear was enormous. The spiral of silence atmosphere was in full swing. Foolishly, I answered questions brought to me from everyone who asked. No not even as to a Kurdish state. No not even in response to the brutal crush of uprisings. That is the price of uprisings. You might not win, and the reprisals of the same — can be nasty. But no, if no evidence links Iraq to 9/11 — no.

How many actually said whoa, to the Patriot Act, Homeland Security — beyond a temporary prudent measure to ensure that these incidents were not more than a lucky strike?

It’s all well and dandy to be anti-war, when it is quite convenient. And the deomcrats and liberals are the worst. They but a small number in Congress, were all to happy to turn the country into a fear mobile. But are not so keen on holding themselves accountable. Just who is kidding who here.

At least with conservatives who supported said actions and like a pit bull with lock jaw find it hard to let go — they are in a sense more responsible than a slew of hypocritical liberals — who see the episode as an opportunity as did the current wh occupant, or he would not have those same architects in his cabinet.

@ Elite
Within hours of 9/11, Thomas Fleming wrote that the attack would be used to justify an invasion of Iraq. I thought, “Damn, he’s right.” Eventually I followed the links from Chronicles to Antiwar.com and have been a relatively well-informed, antiwar, anti-empire conservative ever since. I’ll admit I felt ‘dirty’ the first time I clicked through to antiwar.com . On Feb 14, 2003, my wife and I marched with tens of thousands (mostly liberals) in Seattle while hundreds of thousands marched in scores of cities across the country. (Local media reported hundreds–that was an eye-opener!). Many conservative voices were concerned with the patriot act and the transparent misleading of the country into war with Iraq.

Well, I spent late 2001 and early 2002 arguing with people (at the office, online) about what appeared to be an impending massive overreaction to 9/11. This resulted in me being labeled as some sort of wussie liberal. The label stuck – I’m now a registered democrat and self-identify as liberal.

The “dirty hippies” and “isolationist” (smears, those) righties were right (albeit coming at the problem from wildly different angles), and the centrists were dead effing wrong.

Now, I actually am fairly liberal and thus I’ve no problem with income taxes. But it’s blindingly obvious to anyone who cares to look that the #1 way a government grows in size/scope is a nice big war.

The primary motivation for the welfare state is not to be found in the horrors of war but in the hearts of people. Sure people want liberty, and they want security. Yes they want choice, but not too many choices. They want diversity, but also sameness. Nature is both more complex and more predicable than ideology allows us to believe.

With limited resources and sitting not far from the edge, people turn to their national governments, as at one time they turned to their tribal councils. Until “traditional conservatives” understand the psychology they will sound as sensible as Libertarians sacrificing reality for their logic — and will be as successful in implementing policy.

When cause and effect are ignored to try to prove a point, it ends up with something illogical like this article.

So, the writer is saying that 3% of the total monies of the Federal Government are the reason for 60+% in entitlements?

The first major entitlements were during the Depression, long before we were at war.

Entitlements and military are two are separate issues. Yes, I’d be the first to want a more efficient military in terms of spending, but to link it with social spending, makes no logical sense.

Social spending has been to purchase votes by what amounts to bribery.

Military spending until 2009 has been to keep the United States safe from enemies and to rescue others from enemies, such as the UK from Nazi Germany, or the Nicaraguans from the killing by the Sandinistas.

Modify the income tax to become a consumption tax, and your complaints above disappear. Since income is consumed, saved, or given away, modify how the income tax system handles those parts of one’s income that are saved or given away and you have a consumption tax, one that could even be a progressive tax.

1. Delay any tax liability on that part of income put into savings (or investments) until it or its earnings are consumed.

2. Shift tax liability on that part of income given away to anybody that accepts that liability themselves.

At the same time, eliminate the many, many tax preferences aimed at the same general goals.

“Both taxes and spending as we know them today—Leviathan’s head and tail—spring from the warfare state. “

Amen. There is little better proof of this than the TSA, which is leveraging the current sequester hysteria by threatening to double the amount of time we waste in those damn airport lines unless it is permitted to hire even more officers.

We should thank Ivan Eland for helping us to connect a few dots between and among 19th c. American militarism, the GOP, and American welfare statism today. But what about neglected dots from federalist militarism ca. Sept 1787 to the heroic go-getters who supply the American military?

Let’s think in general terms for a moment. Now, would it really be shocking to discover that militarism is a powerful spark plug of crony capitalism, too? Well, no. After all, governments the world over are in the business of choosing winners and losers in lucrative contests to supply militaries with goods and services. It worked this way in the British empire when Cato’s letters were written. It worked this way during the great secession movement of 1776. And it works this way today in the good ol’ USA.

Of course, militaries could scarcely obtain supplies without financing. So over time militarists, er, conservatives, set up taxation and borrowing. They nationalize money and soon enough there’s a central banking scheme, too. Thus is established the machinery of the croniest crony capitalist’s dream, and all of it is operated under the color of law and on the pretext of self-defense, liberty, etc.

I could go on with related points about what is likely to happen when you establish a government powerful enough to loot and redistribute to businesspeople on the pretext of self-defense. Private property rights have been undercut already through taxation, so rigging of commerce by less onerous means will surely be possible. Geo. Washington and other instatiable go-getters don’t even need a big war to cause problems through their fancy governmental machinery, and if one day many years later some bleeding hearts scream about the entitled poor, go-getters can mollify them with a few handouts easily rationalized as a cost of doing business.

But fear not, my federalistic friends! “Traditional conservatives recognized that war is the primary cause of overweening government in human history; thus, they promoted peace” by demanding abolition of militarism itself. In fact, “[t]raditional conservatives” demanded government so limited that it could never be construed has having authority to raise and to equip armies and navies. This motivated them to undo the federalists’ insidious error. Right?

Conservatives are no more prone to engaging in conflicts out of a love for it. The comment just does not make sense to me. Conservatives as of 9/11 are heck bent on defending the country. Now whether they have been over zealous in said endeavour, I think is in the affirmative. look democrats and liberals were all too happy to be on the war defense wagon, until they realized that war is a messy business, full of nasty and unwholesome consequesnces.

The level of hypocrisy with which liuberals and democrats are willing to dole out is just mystifying. And what’s more the inability to hold democratic law makers to the account with which you have held republicans for the same policy initiatives, leaves them no moral high ground upon which to criticize.

As for the military industrial complex, which has actually served the country well in her defense, while I would not argue against reform, there are thousands of employed citizens due to their existence.

Look no further than Britain. After World War II, despite Winston Churchill’s wartime leadership, Clement Atlee overwhelmingly defeated him for prime minister. Atlee immediately set out to nationalize 90% of Britain and today still suffers from the consequences.

War costs alot and of course should be avoided as much as possible. Our economy and resources are so huge now that we’ve been able to afford a massive standing military. Why don’t our governments save pockets of money that are invested to compensate for inflation and left for such things as war or economic downturns? Do we even need deficit spending anymore?